Oil prices edged lower on Thursday, with investors facing the looming August 1 tariff deadline set by US President Donald Trump and the uncertain fate of countries yet to secure trade deals with Washington.
Brent crude futures for September, which expired on Thursday, settled down 71 cents, or 0.97 per cent, at $72.53 a barrel. The US benchmark, West Texas Intermediate (WTI) crude for September delivery, fell 74 cents, or 1.06 per cent, to $69.26. Both contracts had posted one per cent gains on Wednesday but saw more declines earlier in the session on Thursday, with US crude futures shedding over a dollar.
The White House indicated on Thursday that countries without negotiated trade agreements or tariff exemptions would be contacted by the end of the day regarding future trade terms. This comes as the US claims to have reached deals with two-thirds of its top 18 trading partners.
Further contributing to the market’s unease was the announcement that President Trump and Mexican President Claudia Sheinbaum had agreed to a 90-day extension of their existing trade deal to allow for continued negotiations aimed at a new agreement.
“Mexico will continue to pay a 25% Fentanyl Tariff, 25% Tariff on Cars, and 50% Tariff on Steel, Aluminium, and Copper. Additionally, Mexico has agreed to immediately terminate its Non Tariff Trade Barriers, of which there were many,” President Trump stated in a social media post.
John Kilduff, a partner at Again Capital in New York, noted that the news of the extension “kicks the can down the road” and weighed on crude futures. He added, “Overall the tariffs are negative for oil demand going forward.”
The trade tensions are also feeding into domestic economic concerns. US inflation rose in June, partly due to tariffs increasing prices for imported goods such as household furniture and recreational products. This supports expectations of escalating price pressures in the latter half of the year, potentially delaying a Federal Reserve interest rate cut until at least October. Lower interest rates typically reduce consumer borrowing costs, stimulating economic growth and, in turn, oil demand.
Adding to the downward pressure on prices, US crude oil production reached a record 13.49 million barrels per day in May, according to data from the US Energy Information Administration (EIA). This marked an increase of 24,000 bpd from the previous record set in April.
Furthermore, US crude oil inventories saw a notable rise, increasing by 7.7 million barrels to 426.7 million barrels in the week ending July 25. The EIA attributed this build, which defied analyst expectations of a 1.3 million barrel draw, to lower exports.
